Ultimate Escapes creditors committee seeks relief from CapitalSource

By Lisa Kerner

Charlotte, N.C., July 1 - Ultimate Escapes Holdings, LLC's official committee of unsecured creditors filed a complaint against CapitalSource Finance LLC, CapitalSource Bahamas LLC and CapitalSource Bank for declaratory relief for three issues, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The three issues are whether:

• CapitalSource has a secured claim against any recovery that is obtained from the debtors' officers and directors, whether or not funded by insurance;

• The agreement by the debtor-in-possession lender to credit bid its post-petition financing extends to amounts advanced under the supplemental DIP orders; and

• The proceeds of a settlement between the debtors and the committee, on the one hand, and Richard V. Keith, on the other, belong to the debtors' estate as proceeds of an avoidance action or to CapitalSource.

According to the filing, the committee wants the court to declare that CapitalSource's pre-petition liens do not extend to any recovery that is obtained from the debtor's officers and directors; the term DIP debt includes the amounts advanced under the supplemental DIP orders requiring CapitalSource to credit bid all amounts advanced under the final DIP order along with those amounts funded under the supplemental DIP order; and that the proceeds of the settlement with Mr. Keith belong to the debtors' estate, not CapitalSource.

Plan filed June 30

As previously reported on Thursday, Ultimate Escapes filed a Chapter 11 liquidating plan and related disclosure statement based on a settlement with CapitalSource under which the final $300,000 of financing approved as part of Ultimate Escapes' DIP facility will be funded on the plan effective date and applied toward payment of administrative claims.

The settlement also outlines the allocation of avoidance action proceeds:

• The first $2.3 million in avoidance action proceeds will be paid to CapitalSource in settlement of its post-bankruptcy secured lender claim;

• The next $500,000 of avoidance action proceeds will be distributed to professionals for any deferred compensation claims that remain unpaid on the plan effective date;

• 80% of the next $1 million of proceeds will go to CapitalSource on account of its lender unsecured deficiency claims, and 20% will go to holders of unsecured claims;

• 65% of the next $1 million in avoidance action proceeds will go to CapitalSource for unsecured deficiency claims, and 35% will go to unsecured creditors;

• 40% of the next $1 million in avoidance action proceeds will be used to pay CapitalSource's lender unsecured deficiency claims and 60% to pay unsecured creditors; and

• 15% of the balance of avoidance action proceeds will be applied to CapitalSource lender unsecured deficiency claims, and 85% will be applied to unsecured claims.

Under the plan, remaining assets will be transferred to a liquidating trust for distribution to creditors.

Ultimate Escapes, a Kissimmee, Fla.-based destination club operator, filed for bankruptcy on Sept. 20, 2010. The Chapter 11 case number is 10-12915.

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